PERSPECTIVE ON MEXICO : What Is Zedillo Waiting For? : The entire country--its economy, its institutions, its structures of inequality--is desperate for reform.

How can Mexico trigger two world financial crises and at the same time consider itself the shining example of economic reform and leadership? We Mexicans have learned little from the mistakes of the past 20 years. Instead of recognizing the fundamental flaws in our development model, we are once again blaming a particular leader or technical error. Folly is repeating the same experiment using the same method and expecting a different result. Yet, Mexico is once again applying the same recipes as before.

No country’s presidents have had more training in economics than Mexico’s. Carlos Salinas and Ernesto Zedillo hold doctorates in economics from Harvard and Yale. Yet, each six-year cycle of boom and bust keeps getting more costly. Each of the last four presidents was hailed as a responsible leader when contrasted with his predecessor. The nation and the world bought in, stocks boomed, investment flowed, greed grew and then came the ever more horrifying crash. Since 1976, the nation’s minimum wage has dropped 72% in real terms. The average industrial wage is now less that 50% of what it was 20 years ago.

Mexico time and again has applied all the “right recipes.” It fought inflation, drastically cut government spending, opened its markets, sold state enterprises, pushed development of the private sector and joined the world capital markets. All necessary but not enough. Mexico never consistently increased its citizens’ average income or generated enough jobs to cover its population growth or improved its income distribution.

Things are not getting better. Since the December devaluation, more than 1 million people have lost their jobs.

How much evidence is it going to take to understand that something fundamental is wrong? In recent weeks, as the economy continued its meltdown, the stock market once again boomed and busted. We are told the worst is over. Meantime, the majority of the country, especially the urban and rural poor, will suffer the 16th year of negative or zero economic growth.

Mexico now requires extraordinary leadership from President Zedillo. But first Mexico has to address three essential issues: We need a debate on a better economic model, reform of the political fabric and the establishment of a consensus that will increase trust, both in one another and in the government.

Mexico’s choice today is the same as it was in the early 1980s: Restructure the debt or keep growing poorer. No matter how talented or smart a finance minister the president appoints, the numbers don’t work. We have to create a form of debt rescheduling that will allow Mexico to achieve enough growth to pay its creditors. This is in both the United States’ and Mexico’s interest. In its first crisis, Mexico’s overwhelming debt load threatened the largest banks in the United States; in the second crisis, the world’s emerging capital markets went into shock. If nothing is solved, if we simply keep postponing, the financial crunch will become far worse and regional conflicts like Chiapas could become more serious.

Mexico also has to reorganize its political life. Most political institutions are out of touch with the citizen. President Zedillo has to lead a serious political opening. At a minimum, this requires separating his political party, the PRI, from his government, allowing a safe space for alternate political views. This should generate a real debate on Mexico’s options and create both a vision and a consensus regarding the country’s future.

Many of the government’s activities and numbers continue to be treated as a state secret. For instance, there is no place where citizens can review government contracts and their compliance. This lack of a free flow of information about government activities is compounded by the government’s marriage of convenience with the television monopoly.

One of the most economically destabilizing forces is unchecked campaign financing. The scale of the violations is so large that it has a major impact on inflation, on government deficits, on the national debt. Two recent scandals are illustrative. In Tabasco, the campaign financing ceiling was exceeded 40 times over by the current PRI governor. In Mexico City, the head of a mid-size company, Aeromexico, was asked to donate $8 million to the PRI campaign fund. Larger companies reportedly were asked for $25 million.

The government has had trouble designing and communicating a credible message. Over these months, the government has set up a policy and reversed it time and again, sometimes in less than 24 hours. Examples abound, be it ordering the destruction of the Zapatistas in Chiapas or not letting the peso float while $7 billion was leaving the country in a single day. When government economists point out that one of the causes of the current crisis is the low level of domestic saving and investment, perhaps they should realize that people are very unlikely to increase their stake if they do not trust the system.

It all comes down to trust. President Zedillo has to improve his own credibility as well as that of the system and its institutions. In the current situation, politics and leadership are just as important as macroeconomic statistics.